What Are The Advantages of Consolidating Debt?

What Are The Advantages of Consolidating Debt?

You may have heard the commercials on the radio or seen them on television: “Consolidate your debt! Gain financial independence! 
Live debt-free!” 

They sound appealing, especially if you live hand-to-mouth, struggling just to make the minimum payments on all your loans and 
maybe have enough left over to buy groceries each month. Is debt consolidation really the panacea the commercials make it out to be?  

Consolidating debt into one monthly payment with a low interest rate really can help someone pay off loans and become financially 
independent. You may be a good candidate for debt consolidation if: 

-	You struggle each month to make the minimum payments on credit cards and other unsecured loans
-	You are employed and would be able to make one monthly payment that will help reduce your debt, as well as making 
the minimum payments on loans not covered by the consolidation
-	You are tired of making payments and never seeing your debt go down
-	You are prepared to live without credit cards for as long as it takes to pay off your loans

Advantages to Debt Consolidation

When you consolidate all your credit card payments into one loan, it means fewer checks to write each month, fewer 
due dates to remember, and it even saves on postage if you still pay your bills by mail. But these are just small 
bonuses compared to the true advantages of debt consolidation.  

Debt consolidation can:

Reduce your total debt before you even make a payment. When you work with a debt consolidation firm, the company 
calls your creditors to negotiate a reduction in overall debt. This is called a “debt settlement,” and many companies
 boast that they can reduce loan balances by 50 percent or more. 

Create one monthly payment well within your budget. A debt consolidation company will look at your income-to-debt
 ratio and create an affordable payment plan. If this means you can pay off your debts in one year – great! 
If it takes five years, that’s okay, too. The important thing is your debt will be declining each month. 

Get creditors off your back. If you face harassing phone calls from creditors, debt consolidation really can 
improve your life. With creditors off your back, you’ll be able to sleep better and focus on reducing your 
debt to achieve financial independence.

Prevent further damage to your credit report and credit score. When someone misses payments for 90 days, 
this delinquency goes on their credit report and adversely affects their credit score. 
That makes it harder to get loans in the future. A negative credit report may even make it harder to find a job. 

Additionally, late payments cause credit card companies to raise interest rates, making it even harder to get out of debt.
 Debt consolidation – as well as debt reduction – will be reported to the credit agencies, but does not reflect as poorly 
as missed payments or the alternative: bankruptcy. 

In order for debt consolidation to work, you must be prepared to change your lifestyle and live without your credit cards.
 However, the sense of accomplishment and financial security you’ll feel from watching your loan balance drop every month can make it well worthwhile.

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